EOC_Answers_Ch03 - Chapter 3: Scarcity, Trade-Offs, and...

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Chapter 3: Scarcity, Trade-Offs, and Economic Growth True or False 1. Consumer sovereignty describes how individual consumers in market economies determine what is to be produced. T 2. Command economies rely on central planning, where decisions about what and how many are largely determined by a government official associated with the central planning organization. T 3. All economies, regardless of political structure, must decide how, from several possible ways, to produce the goods and services that they want. T 4. In any economy, it would always be less efficient to dig ditches by having many workers use their hands than to use workers with shovels or a backhoe. F 5. Each nation tends to use the production processes that conserve its relatively scarce (and thus relatively more expensive) resources and use more of its relatively abundant resources. T 6. In a market economy, with private ownership and control of the means of production, the amount of output one is able to obtain depends on the quantity and quality of the scarce resources that the individual controls. T 7. The market where households sell the use of their inputs to firms is called the product market. F 8. The circular flow model illustrates the continuous flow of goods, services, inputs, and payments between firms and households. T 9. With a straight-line production possibilities curve, the opportunity cost of producing another unit of a good increases with its output. F 10. The economy cannot produce beyond the levels indicated by the production possibilities curve during a given time period, but it is possible to operate inside the production possibilities curve. T 11. Underutilized resources or those not being put to their best uses are illustrated by output combinations along the production possibilities curve. F 12. We all have an interest in the efficient use of all of society’s resources because more of everything we care about can be available for our use as a result. T 13. If resources are being used efficiently, at a point along a production possibilities curve, more of one good or service requires the sacrifice of another good or service as a cost. T 14. The basic reason for increasing opportunity cost is that some resources and skills cannot be easily adapted from their current uses to alternative uses. T 15. Investing in capital goods will increase the future production capacity of an economy, so an economy that invests more now (consumes less now) will be able to produce, and therefore consume, more in the future. T 16. An economy can grow despite a lack of qualitative and quantitative improvements in the factors of production. F 17. Economic growth means a movement along an economy’s production possibilities curve in the direction of producing more consumer goods. F 18. From a point inside the production possibilities curve, in order to get more of one thing, an economy must give up something else. F Multiple Choice 1. Which of the following is not a question that all societies must answer?
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This note was uploaded on 03/30/2010 for the course ACCOUNTING BUS2241 taught by Professor Kickland during the Spring '09 term at Troy.

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EOC_Answers_Ch03 - Chapter 3: Scarcity, Trade-Offs, and...

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